Deed fraud is on the rise, and real estate agents must be vigilant to help clients avoid these increasingly sophisticated scams.
What is Deed Fraud?
It typically involves scammers choosing a property (often a vacant home) and gathering information to then assume the owner’s identity. They forge their name on the transfer paperwork —and arrange for the transfer of ownership of the property, while the real owner is none the wiser. It can be a long and stressful process for unknowing property owners to unravel, once they are finally alerted that their property has been sold or refinanced without their approval.
Other Deed Scams
Other less damaging deed scams involve unscrupulous (but sometimes legitimate) companies presenting home buyers or homeowners with exorbitant invoices for deed title searches that they don’t need.
In other cases, people pretending to be the government create realistic government-style invoices for services relating to deeds that don’t even exist. Many home purchasers, excited about their new homes, or vulnerable homeowners, pay these without a second thought, thinking they are an official invoice from the government. But instead, it’s scammers invoicing for information the homeowner/purchaser already has or doesn’t need.
Impact on Real Estate Licensees
Deed fraud and scams aren’t only an issue for home purchasers. As a real estate agent, if your client becomes a victim of this, there could be a considerable impact on you as the real estate agent.
- Imagine if you’re managing a holiday rental property and discover that the home has been sold illegally through deed fraud.
- What if a fake company uses your details(lifted from your marketing pieces) on an invoice for deed or title searches — and your clients think it’s an official invoice from you?
Scammers are becoming increasingly more cunning in their schemes. Real estate professionals must keep updated on what potential threats are out there. This is important so you can advise your clients and help prevent them from becoming involved in a scam situation.
What You Can Do To Help Clients Avoid Deed Fraud
Real estate professionals play an important role in helping clients to avoid deed fraud and scams. Here’s what you can do to keep your clients (and your real estate business) safe…
1. Educate Your Clients
Most clients won’t have even considered deed fraud as a potential issue, unless it’s something they’ve faced previously. Real estate professionals should educate clients about the types of properties most at risk and suggest prevention strategies.
Deed fraud is most common in homes that are vacant for long periods, such as deceased estates or investment properties where the landlord lives out of state or a long distance away. Holiday homes that are left vacant for long periods off-season (or due to COVID) could also be at a higher risk.
Most importantly, educate your clients about the sales process and everything involved in the transaction. You need to cover things like how you will contact them, how often, when payments for things need to be made and how they will be made. If clients are fully informed upfront that all deed information is gathered as part of the process, they may be less likely to fall for a deed scam if they’re invoiced by a separate (and potentially fake) company.
2. Offer Strategies To Help Reduce the Chance of Deed Fraud
Since long-term vacant properties are statistically at a higher risk, suggesting more frequent inspections can be beneficial. Vacant properties must be maintained and monitored.
In some counties, you can now register to be notified any time a property record changes. This could be a good option for clients who want to avoid their property being transferred unknowingly to a third party. Even if your clients are in a county that doesn’t offer this notification service, periodically checking the property record via the county’s register of deeds can give a client peace of mind.
Remind clients to be careful with their personal information. Utility bills and other documents should not be sent to their vacant property address. If they are, this is only helping the scammers to obtain confidential personal information which can then be used against the property owner.
3. Help Clients Understand the Warning Signs
There are some warning signs to watch out for, which could be an indicator of a scam in action. You should let your clients know about these red flags. For example, if any of the following occur, it’s worthy of further investigation to see what the issue is:
- If they are no longer receiving utility bills
- An unexplained change in credit ratings
- Unexpected charges showing in bank accounts or on credit cards
- Receiving information in the mail about loans when you didn’t request them
- A tenant stops paying rent (but they may be paying the new ‘owner’ instead)
Protect Yourself with CRES E&O Insurance
To ensure you’re not impacted by a lawsuit regarding deed fraud or scams, real estate professionals need good insurance. Errors and Omissions is a must-have to run a successful real estate business. CRES offers specific-to-real estate E&O solutions for real estate agents, so you can be sure your insurance will meet your business needs. And we can customize a policy for your real estate company to give you superior protection.
CRES E&O Insurance + ClaimPrevent® policies give you access to pre-claim legal advice from qualified attorneys 7 days a week. You’ll find CRES is #1 in preventing claims, because we focus on helping to reduce your risk in every way possible.
Contact the team at CRES for a confidential discussion today. Call us at 800-880-2747.